Sarah Clinton

The mandatory reporting of firms’ internal control effectiveness continues to be debated by equity market participants, U.S. regulatory agencies and oversight committees. We investigate the implications of material weaknesses in internal control and SOX 404 required reporting of such for financial analysts because analysts are important intermediaries in the U.S. capital market and it is not known whether analysts’ forecasts or coverage decisions are affected by firms’ internal control problems or reporting, respectively. Results of our empirical tests indicate that analysts provide less accurate forecasts and there is greater forecast dispersion for firms with ineffective internal control. We also find that firms that disclose internal control problems have less analyst coverage and that analyst following declines after the material weakness in internal control is disclosed. The results are robust to controlling for potential self-selection bias and management earnings guidance. Ou...

Schizophrenia is a devastating mental illness affecting millions worldwide with significant financial and emotional burdens for afflicted persons, their families, and society. Considering schizophrenia as a disorder of neuroplasticity permits integration of competing neurochemical and neurodevelopmental hypotheses. Recent advances have linked the pathophysiology of schizophrenia with abnormalities of the glutamate neurotransmitter system. Elements of glutamergic neurotransmission implicated in schizophrenia, including glutamate receptors and receptor-associated molecules, have critical roles in long-term potentiation, a molecular correlate of neuroplasticity. We suggest that schizophrenia can be considered a disorder of plasticity, associated with molecular abnormalities of the glutamate synapse.

The neurobiological bases of increased vulnerability to substance abuse remain obscure. We report here that rats that were selectively bred for greater drug-seeking behavior exhibited higher levels of FGF2 gene expression. We then asked whether a single FGF2 administration (20 ng/g, s.c.) on postnatal day 2 (PND2) can have a lifelong impact on drug-taking behavior, spatial and appetitive learning and the dopaminergic system. Indeed, early life FGF2 enhanced the acquisition of cocaine self-administration in adulthood. However, early life FGF2 did not alter spatial or operant learning in adulthood. Furthermore, early life FGF2 did not alter gene expression in the dopaminergic system in adulthood. These results suggest that elevated levels of FGF2 may lead to increased drug-taking behavior without altering learning. Thus, FGF2 may be an antecedent of vulnerability for drug-taking behavior and may provide clues to novel therapeutic approaches for the treatment of addiction.

Rats selectively bred based on high or low reactivity to a novel environment were characterized for other behavioral and neurobiological traits thought to be relevant to addiction vulnerability. The two lines of animals, which differ in their propensity to self-administer drugs, also differ in the value they attribute to cues associated with reward, in impulsive behavior, and in their dopamine system. When a cue was paired with food or cocaine reward bred high-responder rats (bHRs) learned to approach the cue, whereas bred low-responder rats (bLRs) learned to approach the location of food delivery, suggesting that bHRs but not bLRs attributed incentive value to the cue. Moreover, although less impulsive on a measure of 'impulsive choice', bHRs were more impulsive on a measure of 'impulsive action'- ie, they had difficulty withholding an action to receive a reward, indicative of 'behavioral disinhibition'. The dopamine agonist quinpirole caused greater psychomotor activation in bHRs relative to bLRs, suggesting dopamine supersensitivity. Indeed, relative to bLRs, bHRs also had a greater proportion of dopamine D2(high) receptors, the functionally active form of the receptor, in the striatum, in spite of lower D2 mRNA levels and comparable total D2 binding. In addition, fast-scan cyclic voltammetry revealed that bHRs had more spontaneous dopamine 'release events' in the core of the nucleus accumbens than bLRs. Thus, bHRs exhibit parallels to 'externalizing disorders' in humans, representing a genetic animal model of addiction vulnerability associated with a propensity to attribute incentive salience to reward-related cues, behavioral disinhibition, and increased dopaminergic 'tone.'

ABSTRACT The mandatory reporting of firms’ internal control effectiveness continues to be debated by equity market participants, U.S. regulatory agencies and oversight committees. We investigate the implications of material weaknesses in internal control and SOX 404 required reporting of such for financial analysts because analysts are important intermediaries in the U.S. capital market and it is not known whether analysts’ forecasts or coverage decisions are affected by firms’ internal control problems or reporting, respectively. Results of our empirical tests indicate that analysts provide less accurate forecasts and there is greater forecast dispersion for firms with ineffective internal control. We also find that firms that disclose internal control problems have less analyst coverage and that analyst following declines after the material weakness in internal control is disclosed. The results are robust to controlling for potential self-selection bias and management earnings guidance. Our study documents the consequences of ineffective internal control for an important class of financial statement users and suggests the required reporting on the effectiveness of internal control is beneficial to understanding the properties of analysts’ forecasts.

ABSTRACT Using a unique, hand-gathered sample of 893 forward-looking voluntary disclosures by 70 proxy contest firms during 1992–2001, we examine whether managers temporarily alter the frequency and tone of their disclosures during proxy contests. Broadly consistent with the corporate control contest hypothesis, we find that, after controlling for performance and other determinants of disclosure, managers increase the frequency of forward-looking voluntary disclosures during the proxy contest relative to the pre-proxy period. After the proxy contest is resolved, managers decrease forward-looking voluntary disclosures. We also find that, after controlling for earnings-based performance and concurrent period stock returns, the voluntary forward-looking disclosure news is more positive, on average, during proxy contests relative to the pre-contest period. In addition, we find limited evidence that disclosure news is more positive during proxy contests relative to the post-contest period, suggesting that the more positive tone of the disclosures during proxy contests is temporary. Our results are robust to alternative estimation methods that model the endogeneity of the proxy contest event and to controlling for management tenure and turnover. In summary, proxy contest voluntary disclosure behavior is consistent with increased incentives to convince shareholders that managers are in control of the operating environment and to signal that poor past performance is transitory. This article is protected by copyright. All rights reserved.

NMDA receptor dysfunction has been implicated in the pathophysiology of schizophrenia. The NMDA receptor is a multimeric ligand-gated ion channel, and the obligate NR(1) subunit is expressed as one of eight isoforms due to the alternative splicing of exons 5, 21, and 22. Alternative splicing of NR(1) subunits modulates receptor function by influencing the association of NR(1) with other NMDA receptor subunits and myriad intracellular molecules, such as the postsynaptic density family of proteins that target NMDA receptors to the synaptic membrane and couple it to numerous signal transduction enzymes. Recently, the authors reported that the NMDA receptor subunits NR(1) and NR(2C) are abnormally expressed in the thalamus in schizophrenia. They hypothesized that this reduction is associated with specific NR(1) isoforms and that NMDA receptor-related postsynaptic density proteins are abnormally expressed. Using in situ hybridization, the authors examined expression of the transcripts encoding NR(1) isoforms containing exons 5, 21, or 22, and the NMDA receptor-related postsynaptic density proteins NF-L, PSD93, PSD95, and SAP102. Reduced NR(1) subunit transcript expression was restricted to exon 22-containing isoforms. Increased expression of the NMDA receptor-associated postsynaptic density proteins NF-L, PSD95, and SAP102 was also detected in the thalamus of subjects with schizophrenia. These data support the hypothesis of glutamatergic abnormalities in schizophrenia and suggest that glutamatergic dysfunction may occur not only at the level of receptor expression but also within intracellular pathways associated with glutamate receptor-associated signal transduction.